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Public Provident Fund

PPF or Public Provident Fund is a government guaranteed long term fixed income investment option. This is one of the most secure form of investment option available to Resident Indian Investors as the chances of default from Government of India is very low. Some of the typical features of PPF are:
  • Minimum yearly subscription in PPF is as low as Rs. 500. The maximum yearly investments into PPF are restricted to Rs. 70,000.

  • Interest earned on PPF is tax free as per current Income Tax laws.

  • nterest of 8% is earned on PPF is compoundedon a yearly basis, i.e. not only does the principal amount earns the interest, but the accumulated interest on the principal also enjoys interest income.

  • Loans can be obtained against the balances lying in your PPF account.

A PPF account can be opened at any branch of State Bank of India group as well as with some of the nationalised banks of India. The initial duration of a PPF account is for 15 years after which it can be further extended in slabs of 5 years and there is no limit to the number of such extensions. During the period of 15 years, encashment from PPF is not permissible within first 6 years.

Our opinion is that PPF can act as a brilliant option to pep up the debt component of your portfolio. It just requires a commitment of Rs. 500 per year to maintain your PPF account, but the mere flexibility it gives to earn 8% tax free interest is unmatched by other debt options. If you have a family of 2-5 people, you can open up a PPF account in name of each of your family members name after every 2-3 years. This would ensure that after 15 years, every 2-3 years you would have each of your PPF account getting matured which can be further extended for another period of 5 years.
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